Declining Factory Jobs Lift U.S. Unemployment to 5.5%

Declining Factory Jobs Lift U.S. Unemployment to 5.5%

Article excerpt

WASHINGTON (AP) _ Unemployment climbed to 5.5 percent in March
as factory jobs fell for the first time since 1993. The Clinton
administration welcomed the development after a period of torrid
growth, but the news rattled the stock market and raised
recession worries among some economists.

Shortly after the Labor Department reported Friday that the
jobless rate rose from 5.4 percent in February, stocks began to
fall. By 2 p.m., the Dow Jones industrial index was down 35.96
points to 4,169.45.

The Treasury's benchmark 30-year bond was off as well, as
investors worried about a new slide in the dollar, which set
another record low against the Japanese yen.

"I think the stock market is probably worried about the
possibility that this soft landing could turn into a hard
landing," suggested economist Sung Won Sohn of the Norwest Corp.
in Minneapolis.

But many analysts focused on the creation of 203,000 jobs in
March amid indications that wage inflation remained in check.
Despite the job growth, the unemployment rate rose because more
people entered the labor market than found jobs.

"We have hit a glide pattern that is bringing steady job
growth without inflation at a relatively low level of
unemployment," said Labor Secretary Robert Reich. "We haven't had
this good a combination of job growth and non-inflation for
several decades."

Lynn Reaser, an economist with First Interstate Bancorp in Los
Angeles, said the report and other economic indicators so far
this year support "a soft-landing scenario," in which the economy
slows to a sustainable rate of growth that will relieve
inflationary pressures.

Sohn, the Norwest economist, agreed the economy probably has
reached a soft landing, but added, "There is a growing
possibility of something more than that."

Alan Davidson, president of Zeus Securities Inc. in Jericho,
N.Y., was more emphatic. "We can kiss the soft landing goodbye,"
he said. "Recession will start within the next six to nine
months."

Although there were 203,000 payroll additions in March, the
gain was far short of the 345,000 increase a month earlier and
about 100,000 below the average of the prior 12 months. …